The Malta Financial Services Authority (‘MFSA’) outlined instructions on how individuals that have significant or controlling interests with authorised persons, Politically Exposed Persons (PEPs) or other risk flagged individuals must file a declaration regarding their Source of Wealth (‘SOW’) and Source of Funds (‘SOF’).
In efforts to combat money laundering and the financing of terrorism, the MFSA has issued a guidance note for individuals who are linked to or are politically exposed persons. As has been the trend in the wider financial services sector the importance and priority that regulators and stakeholders are placing in enhanced due diligence is growing, a welcome change for a more transparent financial environment in Europe.
The Malta Financial Services Authority (MFSA) regulates banking, financial institutions, payment institutions, insurance companies and insurance intermediaries, investment services companies and collective investment schemes, securities markets, recognised investment exchanges, trust management companies, company services providers, pension schemes and Virtual Financial Assets. It aims to protect consumers rights, the integrity of financial markets, financial stability and the supervision of all financial services activities.
What is Source of Wealth (SOW)
If a person’s wealth can be adequately traced then the transaction they are engaging in will pose less risk in terms of AML and compliance. The SOW declaration should clearly outline the sources of an individual’s wealth, what their property/assets are and the amount of debts they have. An independt auditor or accountant must verify these statements. The Guidance Document provides a non-exhaustive list of various possible sources of wealth, which includes:
- Employment income
- Full legal name, registered address of the employer and nature of business
- Pay slips from the last three months showing employer and amount received
- Statement declaring annual salary and bonuses for the last two years in employment
- Letter from employer confirming salary and years in employment
- Bank statement showing receipt of salary
- If self-employed, latest audited accounts or tax declaration and shareholders register extract
- Company sale
- Letter from a certified lawyer detailing company sale
- Certified copy of the contract of sale and bank / financial institution statement showing proceeds
- Loan
- Loan agreement clearly outlining the date of the loan, the full name and address of the lender, the amount of the loan taken out and the purpose of the loan
- Details of any security
- Savings/deposits
- Bank statement showing name of customer, amount and enquiry of the source of wealth (showing how savings were acquired)
- With regards to each source of wealth listed, not all the documentary evidence needs to necessarily be submitted, but discretion may be applied by the individual n relation to which document(s) are deemed to be best supporting the respective source of wealth.
- Sale of shares or other investment
- Share Certificate/ Contract Note/ Statement
- Bank statement showing the incoming redemption proceeds
- Written confirmation of sale/ holding signed by an individual from a regulated profession on headed paper, clearly outlining the sale value of shares
- Property sale
- Original or certified copy of contract of sale clearly outlining the details of the property sold, the address, date of sale, value of property sold, and the parties involved
- Title deed from land registry
- Company profits/dividends
- Copy of latest audited financial statements
- Copy of latest management accounts
- Bank statement evidencing proceeds
- Board of Directors approval
- Dividend contract note
- Tax declaration form
- Inheritance
- Original or certified copy of Will or Grant of Probate, detailing the amount of inheritance
- Written confirmation of inheritance signed by a certified lawyer/trustee/ executor on letter-headed paper, detailing the amount of inheritance
- Tax clearance documents
- Gift
- Letter from donor explaining the reason for the gift and the source of
- Certified identification documents of donor
- Maturity/surrender of life policy
- Letter from insurance provider clearly outlining policy name and reference number
- Closing statement with the final surrender value
- Divorce settlement
- Original or certified copy of the court order/ agreement
- Written confirmation and details of settlement signed by a certified lawyer
- Retirement income
- Pension statement
- Bank statement showing the pension income
- Letter from the paying institution
- Other Income Sources
- Nature of income, amount, date received and from who
- Appropriate supporting documentation
Read More: Enhanced Due Diligence (EDD) Expert – Sylwia Wolos talks to CIVITAS POST about the evolution and growing importance of EDD
What is Source of Funds (SOF)
Similar but distinct – the source of funds will identify wherefrom specific funds pertaining to the transaction in question are originating as opposed to a wider assessment of where the individual’s wealth comes from in its entirety. Funds should ideally be sent from a regulated credit or banking institution regulated in the EU or in a jurisdiction that complies with AML and anti terrorism financing protocols and benchmarks. Most importantly it is imperative that the funds originate from an account held in that specific individual’s name/ownership unless a justification can be provided as to why the funds transfer will not be structured in that way.
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